subject: Check Whether You Fall In Exemption Criteria Before Planning Financial Audit [print this page] An audit is an assessment conducted independently by duly competent people of the financial statements of a company which includes the profit and loss account, balance sheet and supplementary notes and any other documents as specified by the authorities for that particular business enterprise. An audit aims at satisfying the interest of stakeholders that the books of accounts of the company are properly maintained and accurately presented to them by the directors of the company. In the earlier years, the Companies Act has amended the requirements of carrying out the audit for the companies based in UK and has brought up many exemptions depending on the nature, size and the operations of the business.
Mostly the smaller companies have been included in the exemption benefit. This is governed by the reason that the directors and shareholders of these companies are same, so there is no need for executing the audit of financial statements by these companies. Therefore, the state of affairs of the company where financial statements are being prepared by the directors and these are audited to satisfy them is negating the overall purpose of audit and seems to be pointless and an extra expenditure for these small businesses which does not brings in any advantages.
Presently, small companies as qualified by the Companies Act are exempted from the financial audit compulsion. A business is considered as a small company if it meets the condition of having a turnover of not more than 6.5 million and the balance sheet total below or equal to 3.26 million and is not included in one of the business group which are not eligible for exemption. Balance sheet totals for this purpose are computed as the sum of current assets and fixed assets of the business without deducting any of the current or long-term liabilities. These audit exemptions came into effect for financial periods ending after 31st March 2008. The exemption thresholds are of lower amounts for the accounting periods ending prior to this date.
In these situations you can present your companys account audit statements if you wish, however it's not obligatory. Many a times, you despite of falling in the exemption criteria, may consider doing the financial auditing of your business accounts for the benefit of outside parties such as bank institutions, creditors and clients. These parties highly count on this information provided to the Companies House to judge the creditability worth of the entity.
by: doshi
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